Data center interconnect (DCI) IPoDWDM and WDM system use grew 45% in Q2

A new Dell’Oro Group report noted that the overall optical transport equipment market grew 15% year over year in the second quarter.

Sean Buckley

Sept. 1, 2026

3 min read

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Key Highlights

The DCI segment experienced a 45% YoY growth, driven by IPoDWDM ZR/ZR+ and WDM systems, reflecting strong market demand.
Cloud providers contributed significantly, with double-digit growth in WDM and IPoDWDM optics, accounting for 34% of the optical transport revenue.
North America, especially Northern Virginia, remains the largest market, hosting over 550 data centers and leading the demand for optical network equipment.
Top vendors like Ciena and Nokia led the market with high demand for optical line systems, which grew 80% YoY, indicating a thriving optical networking sector.
The global optical transport market continues to expand, supported by increased investments in data center infrastructure and long-distance backbone networks.

Data center interconnect (DCI) IPoDWDM and WDM system use grew 45% in Q2.

Driven by the strong demand for data center interconnect (DCI), the optical transport equipment market grew 15 percent year-over-year in the second quarter of 2026.

Within the DCI segment, Dell’Oro noted that IPoDWDM ZR/ZR+ and WDM systems led the charge, growing 45 percent year over year during the period.

Another notable segment that saw growth in the second quarter was the cloud provider market.

Cloud provider purchases of WDM Systems and IPoDWDM ZR/ZR+ optics each grew at double-digit rates year over year in the quarter. In total, cloud providers accounted for 34 percent of the Optical Transport market revenue.

“This was another quarter of solid growth for the Optical Transport market,” said Jimmy Yu, Vice President at Dell’Oro Group. “There is strong demand for optical network equipment between neighboring data centers and across long-distance backbones.”

Top 10 U.S. Data Center Markets
According to a recent CoreSite blog post, 10 U.S. markets lead the data center market. While Northern Virginia remains the largest, CoreSite noted that Columbus, Ohio, and Portland, Oregon, recently moved into the top 10.

· Market: Northern Virginia
Data Centers: 550 data centers

· Market: Dallas
Data Centers: Over 200 data centers

· Market: Silicon Valley
Data Centers: About 160 facilities

· Market: Los Angeles

· Market: Chicago
Data Centers: 170

· Market: Columbus
Data Centers: 150

· Market: Phoenix
Data Centers: 170

· Market: Atlanta
Data Centers: 150

· Market: New York Tri-State Area
Data Centers: 130

· Market: Portland, OR
Data Centers: 120

North America leads

From a regional perspective, optical transport revenue grew in all regions.

However, Dell’Oro noted that Asia Pacific lagged because China “strategically shifts its spending from telecom infrastructure to compute infrastructure.”

Unsurprisingly, the North American market continues to lead the data center market. Key U.S. data center markets include Northern Virginia (NOVA), Dallas-Fort Worth, Texas, Silicon Valley, California, Chicago, Illinois, Phoenix, Arizona and Atlanta, Georgia.

Yu said that the demand for optical network equipment is very high “in North America, where many of the largest AI data centers reside.”

He added that Dell’Oro “estimates that more than 40 percent of Optical Transport equipment revenue was driven from this region in the quarter.”

Northern Virginia (NOVA) is leading the charge in the U.S. With over 550 data centers, NOVA has been hailed as the data center capital of the world – and the market lives up to that accolade. A key attraction of NOVA is that besides being located near Washington, D.C., the region offers access to dense, diverse fiber cabling in the nation’s capital. These connectivity sources have attracted rapidly growing enterprises as well as hyperscalers and their customers and partners.

Huawei, Ciena, Nokia, and Cisco (Acacia) dominate

Huawei, Ciena, Nokia, and Cisco (Acacia) remain the top vendors for the trailing four-quarter period, which includes the third quarter 2025 through the second quarter 2026.

Disaggregated WDM optical line systems (OLSs) remained in high demand, growing 80 percent year over year.

Dell’Oro said Ciena and Nokia led the OLS market segment.

Nokia reported that Optical Networks grew 20% year over year, outperforming the broader Network Infrastructure segment, which grew 12% during the second quarter.

While Ciena won’t release its earnings until Thursday, it reported strong demand in its fiscal second quarter for its RLS and Waveserver product lines, both up over 55% year-on-year; optical networking grew 42% in the second quarter of 2025 to $1.1 billion.

Finally, Cisco reported that Acacia Optics took over $1 billion of orders in fiscal fourth quarter 2026.

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About the Author

Sean Buckley

Sean is responsible for establishing and executing the editorial strategy of Lightwave across its website, email newsletters, events, and other information products.